Glenigan Index of construction starts to end of April 2023

The Glenigan Index of construction starts continues to report a decline in April

• The value of underlying work starting on-site in the UK during the three months to April fell 23% against the preceding three-month period to stand 41% lower than a year ago.
• Residential construction-starts slipped back 18% on the preceding three months and 44% against the previous year.
• Non-residential project-starts fell by 29% against the preceding three months to stand 38% down on a year ago.
• Civil engineering work starting on-site declined 18% against the preceding three months to stand 31% down against the previous year.

The overall downward trend for construction starts continues into the May Glenigan Index, with project starts sliding 23% against the preceding three months, to finish 41% lower than a year ago.

Crippling inflation, soaring material and energy costs and confusion around new regulatory frameworks are all affecting activity. The persistence of these factors has inevitably led to an (almost) unprecedented run of decline and delay, as contractors and developers pause starts and investors hold-back until markets stabilise and prices come down.

According to Glenigan’s Economics Director, Allan Wilen, “There’s little doubt starts on-site have crashed and, as highlighted by CPA’s forecast downgrading yesterday, it looks as if this protracted period of depressed activity across the entire sector will continue well into the year. A weak economic outlook and myriad external events are to blame for the current situation and it will likely be Q.4 2023, or even Q.1 2024, before we see a significant softening in interest rates. This will, it’s hoped, inspire the confidence needed to commit the collective shovel firmly into the ground on a nationwide scale.”

Taking a closer look at sector verticals and UK regions…

Sector Analysis – Residential

Overall, residential construction performed poorly, with project-starts falling 18% in the three months to April, to stand 44% lower than a year ago.

Particularly, private housing fell back sharply, down 51% compared to 2022 levels and 23% on the preceding three months.

Although a less dramatic fall, social housing performance was mediocre at best, dipping 6% against the previous three months and 10% on the previous year.

Sector Analysis – Non-Residential

The gloomy outlook continued into non-residential verticals, falling 29% against the previous three months to finish 38% lower than the same period in 2022.

Education was the only growth sector, bucking the trend with strong numbers. The value of the underlying project increased 9% against the three months to April, standing 23% up on 2022 figures.

Industrial starts tumbled by a third (-32%) against the previous three months, with performance slashed almost in half (-46%) compared to last year.

Retail also fared poorly, with the value of starts falling significantly against 2022 (-47%) and down 27% compared to the preceding three months to April.

Offices, which experienced an uptick in activity in Q.4 2022 were sluggish, with project start cascading 39% against the preceding three months, and 54% down on 2022 levels.

Health starts also fell significantly, declining by 49% against the preceding three months to stand 52% down on a year ago. Hotel and leisure, and community and amenity project-starts decreased 41% and 23% respectively against the preceding three months, standing 32% and 41% down on the previous year.

Civils work starting on site slipped back 18% against the preceding three months to sit 31% down on a year ago. This can be largely attributed to a collapse in infrastructure activity, which dropped by a quarter (26%) in the three months to April, ending 47% lower than 2022 levels. Although utilities numbers remained flat against last year, they were down 9% compared to the preceding three months.

Regional Analysis

UK regional performance was generally poor, with most areas experiencing a softening in project starts during the Index period.

The North East experienced the sharpest decrease against the preceding three months, with project starts falling 50% to stand 27% lower than a year ago. It was a similar story in the South East, with the value of projects starts cleaved in two (-50%) against 2022 results and 42% down on the three months to April.

Project starts in London and the South West faltered, slipping by 12% and 20% respectively against the preceding three months. They were also 32% and 43% lower than a year ago.

Wales experienced a decrease against the preceding three months (-12%) but was, encouragingly, up 13% on 2022 levels.

Yorkshire and the Humber was 28% down on the previous three months and almost two-fifths (38%) lower than the same period last year. Scotland also declined 38% on the previous year, dipping 11% on the previous three months.

The East of England, Northern Ireland, the East Midlands, West Midlands and the North West also suffered project start falls against both periods recorded by the Glenigan Index.